“More downslides to come” for Aussie property

AMP chief economist, Shane Oliver, continues to hold a bearish view on Australian property prices, where last month he forecast “average capital city prices falling 10-15% from their April high out to mid-next year with Melbourne most at risk and likely to see a 15-20% decline”.

Talking to Domain’s Property Unpacked podcast, Shane Oliver warned there are “more downslides to come” for Australian property values:

“We’re still going through the pandemic, and we’ve seen weakness in property prices around the country. Generally speaking, prices have softened.

“I think there’s more downslides to come because quite simply we have a lot of people protected by JobKeeper, a lot of people protected by bank payment holidays – there’s almost 500,000 mortgages on payment holidays. Those protections will come to an end and expose the property market to more falls.”

According to Oliver, the Australian property market also faces three longer-term headwinds, namely: a prolonged period of high unemployment, much lower levels of immigration (impacting Sydney and Melbourne the most), and the shift to working from home.

Finally, Oliver believes that the Australian property market could be in the doldrums for five or six years.

I will add that the 30-year tailwind from falling mortgage rates is over, meaning that growth in property values will need to come from incomes, where growth is also likely be sluggish:

The full podcast is below.

Leith van Onselen
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Comments

    • The Sling Shot Boys. Inc

      Revolutions are never created by poor people.
      They are created by middle-class people –
      Who are educated to expect opportunities.
      These opportunities are blocked by the political or economic system (housing)
      Thus the gap between their expectation and reality causes political instability.
      And right now, Scotty from Marketing, is fresh out of slogans

    • On a fb group I’m in someone asked if they should hold off 18 months because of they read the market was going down. The majority said buy now, never been a better time to buy and you’ll regret it if you don’t buy now. When asked to back up why, there evidence was because they think or gut feeling that prices will go up. When I pointed them to a graph of current GDP and the headwinds up ahead I was shouted down as having no idea and that the banks will just lend more. Apparently less money in the economy and no job doesn’t mean anything in this country… My point is sentiment is still strong in this country and I don’t see that turning until JK/JS and mortgage holidays are reigned in.

      • Agreed. Property is having another crack at the big time in Brissy. Once the stimulus is dialed back and ‘mortgage and rent holidays’ gone, that should be when things get interesting. But you can expect more stimulus to keep this charade going.

        • There’s different groups of sellers in the market, and their position will dictate their strategy and timing to sell. It won’t be a waterfall but will aggregate over 12-18mths.
          E.g. for battlers it may be 2-3mths for people to burn through their cash for repayments, 1-6mths of negotiation/arbitration with banks before getting hosed, 1-3mths banks to list foreclosed properties (if at all).

          That’s without apra or Govt attempting to shift the laws of gravity.

      • An unemployed couple on Job Keeper can apply and be approved for a million dollar right now with zero deposit down.

        It would cost them between $600-$700 / week depending on their government grants which are massive – leaving them $800/$900 / week spending and bills.

        Thats why we have a boom.

          • China PlateMEMBER

            well he’s name is ‘Boulder Dash”. Perhaps he’s telling………………well balderdash

        • Rikki StocksMEMBER

          I just can ‘s see it myself.
          Single income (didn’t count the wife’s part time gig), 2 kids in private school, 6 figures, 250k + in investments and the bank said they would lend me 265k.
          Maybe the wife & I need to go on JK to access those juicy mortgages.

      • Based on this and what I have seen in similar groups on reddit, I would say mental health is on the way down, too many irrational people out there with insane ideas.

        The level of “out of touch with reality ” Reminds me of my latest Ex who argued we could keep spending above our means as the universe would provide…..

        She has since found out the universe provides but robodebt takes away…. She was found to have been defrauding welfare and has to pay it all back plus fines, which they are taking out of her current welfare payments ( FTB part A and B ) and income…

  1. It might be a contrarian view, but I am picking Sydney might do OK, at least hold up, as the flow to Melbourne in recent years reverses because of the Andrews govt. lockdown debacle.

  2. JK reduction on 24th September is a key date IMO. As others have noted, we’re in suspended animation.

    Controlled descent is being attempted, key word being attempted. The cynic in me says they’ll keep trying to delay the inevitable until an election late next year and that the LNP really didn’t want to win the last election.

    I note Cormann just took an $82k hit on an investment property in WA.

    https://twitter.com/AvidCommentator/status/1302962827364237313

  3. Houses are selling like hotcakes in SEQ. and for more than last year IMO.Nothing is shaking the market, even COVID.Long time bears have some reasons to be upset if they are still renting

  4. Goldstandard1MEMBER

    The real gold is hearing that the only place going well is SE Qld where old people are moving from Vic. They don’t need jobs. I’m hearing from mates that unemployment is getting real bad there with no tourism biting hard and when JK and JS decreases then you’ll see the real economy in all it’s nude glory.

    • Seeing plenty on twitter to suggest there is carnage on the GC as we speak. Opinions vary and hard to tell whether the push from Victoria will have legs, but seen a few surveys that suggested 15% might be keen on the move. Even if it’s 1/5th of that, it’s huge.

  5. Im on the sunshine coast in Queensland and we are bucking the trend with housing price increases. Even with borders shut, there is a big supply of Brizzy people buying the house by the sea atm. I wonder if this regional market will be somewhat immune from the big city slowdown?

  6. Rorke's DriftMEMBER

    Was in Manly in Sydney on Saturday and saw an auction sign, so hung around to have a look. House at 65 Osbourne Street. Only a few neighbours turned up. No registered bidders hence no bids. After a bit of theatre the auctioneer said he’s going to put a Vendor bid in of $3.150m. What sort of bushlitt is that. There’s no price discovery with this stuff, just some fatansy price that the owner says they want then a ridiculous mechanism to allow them to record a bid.

  7. Houses on Sydney’s upper north shore continue to sell fast. Most do not have their sale prices disclosed bu the few I know of are doing OK. It’s not peak of 2017 but its is still very frothy.

    For my money I think all the odds are stacked to the downside. Soon we’ll see just how far this government will go to keep the ponzi going.

    At worst (for a buyer like me) it will be a long slow slide down in price. At best it will be a sharp correction in Q1-Q2 2021 as the multiple impacts of dole hider, deferred mortgages and the insolvent trading holiday all fade.

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